The Real Retirement Math Is All About Cutting Spending

By

Neal Templin

Sept. 1, 2019 8:00 am ET

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Photograph by Paul Yeung/Bloomberg

For 40 years, I have lived the math of addition. Now comes the math of subtraction.

When I was working full time as a journalist, my salary grew over the years. I switched from a little newspaper to a big newspaper, I stopped reporting and became an editor, I moved around the country as a bureau chief. All these moves pushed up my pay—sometimes a little, sometimes a lot.

It was a good thing because our expenses were on the march with three children to raise. We had tight times but we knew we’d dig ourselves out eventually. And we did.

Retirement is a different story.

I plan to work, freelancing articles like this one for now. I’m grateful for the opportunity to keep spilling ink. But there’s no way I’ll earn nearly as much as a freelancer as I did as a full-time journalist.

Instead, I will be counting on a combination of savings and, eventually, Social Security, for most of my income unless I go back to work full time, no sure thing for a journalist with a print background. That’s where the math of subtraction comes in: It is easier to cut expenses than to earn more money.

Cristina Livadary, a financial planner in Marina Del Rey, Calif., said she is advising a couple who were spending $17,000 a month when the husband, the primary earner, took a buyout package from his tech company. He was 61 years old and feared he’d never get a job again because of his age.

The couple intended to live off $1 million in retirement savings. Livadary told them they would run out of money in five years if they kept spending at that pace.

The couple listened. They slashed their spending within a few months to less than $10,000 a month within a few months.

How did they do it?

They had been spending more than $3,000 a month on their adult children to help out on everything from rent to health care, Livadary said. After a difficult conversation with the children, they cut that to $400 a month.

They had been spending $800 a month on restaurant meals. They cut that to $200. They switched to cheaper health insurance. They set a budget on spending at Target and Amazon. They prioritized which home improvements they wanted most. And they began budgeting for vacations.

Sometimes more-drastic steps are needed to stretch retirement dollars. Gabriel Shahin, a financial planner in Ontario, Calif., has had more than a dozen clients sell homes in California and move to Nevada, which has lower house prices and no state income tax. Most clear $250,000 to $500,000 in cash from selling their California home and use that to buy a house in Nevada without a mortgage. Their monthly spending declines by perhaps $2,000 a month.

“That’s almost like another Social Security payment” for these clients, Shahin says.

Housing is a sensitive subject for me. Readers of my past Barron’s work may recall a battle last year with my wife over whether to buy a bigger home in New Jersey. I wanted to keep our expenses as low as possible. My wife, Clarissa, wanted a bigger house on a less busy street in which she could entertain friends and family.

Guess what? I lost that battle.

We ended up buying a bigger house on a tranquil street. The good news is that it didn’t cost much more than our old home. The bad news is that our property taxes rose $7,000 to almost $25,000 a year. Thank you, New Jersey!

That wasn’t exactly the math of subtraction, was it? But I had a full-time job when we made the purchase. And one of the reasons I’ve been married to the same woman for almost 38 years is that I know when to run up the white flag.

The good news is that we own the house free and clear, and we have no other debts. So we should be fine as long as we watch our other expenses.

We’ve already been cutting back. My wife is scaling back the renovations she plans on our house. We’re not eating out as much. When we travel to our home state of California in September, we may stay with relatives part of the time instead of renting. When our elderly Chihuahua gives up the ghost, there won’t be another pooch. I love dogs but they are expensive, especially if we travel more and have to board them.

I’m taking private French lessons as an homage to my French grandmother. When my current block of classes expires, I will bid adieu to formal instruction in that least forgiving of languages. But I will keep having my weekly breakfast with French friends and listening to French radio.

The bottom line is that without losing any of the things that most matter to us, we can still trim our spending by hundreds of dollars a month. That should do the trick and allow us to live off our retirement savings.

And if it doesn’t? Then we’ll sell the house at some point and move. I love New Jersey. But there are plenty of lovely places in this country that are a lot cheaper.

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